2008 (7) TMI 565 - HC - Companies Law

Summary

Issues:
- Dismissal of Company Petition for winding up
- Outstanding balance dispute and quality of supplied products
- Lack of proper notice served
- Lack of pleading regarding inability to pay debts

Analysis:
The appeal challenged the dismissal of Company Petition No. 568 of 2000 seeking winding up of the respondent-company due to an outstanding balance dispute. The appellant alleged an outstanding balance of Rs. 42,544 for supplying corrugated boxes to the respondent-company, with interest on delayed payments. Despite notices and reminders, the amount remained unpaid, leading to the winding-up petition. The respondent disputed the outstanding balance, claiming substandard quality of supplied boxes and partial payment of Rs. 29,222. The court noted the lack of definite liability at the time of the demand, as the balance was under dispute, and the service of notice was also contested.

The learned single judge dismissed the petition, emphasizing the lack of proper pleading. The court highlighted the necessity for a minimum plea of the respondent's inability to pay debts to invoke section 433(e) of the Companies Act, 1956. The petition's mention of the company's failure to liquidate the outstanding amount was deemed insufficient to establish the respondent's inability to pay, as it did not imply neglect to pay. The court rejected the argument that non-payment post notice issuance indicated inability to pay, stressing the need for strict pleading in winding-up cases, which the current petition lacked.

The court concluded that the appeal lacked merit and was dismissed without costs. The judgment underscored the importance of clear pleading regarding the respondent's inability to pay debts in winding-up petitions, highlighting the need for precise legal grounds to support such claims.